To OTC or Not To OTC? How Audiologists Need to Respond to Over-The-Counter Hearing Aids

By Nancy M. Williams

To OTC or not to OTC, that is the question for audiologists now that the Over-the Counter (OTC) Hearing Aid Act has become law. The introduction of OTC hearing aids into the market has the potential to seismically reshape hearing healthcare. Audiologists need to determine how and when they should adapt their offerings to respond to this event with its double sides of opportunity and challenge. My recommendation: audiologists should conduct market tests now to start formulating their product and service strategies for when the Over-the-Counter (OTC) regulations take effect.

The Potential Impact of the OTC Hearing Aid Act

President Trump signed the OTC Hearing Aid Act into law in August, as part of the larger 2017 Food and Drug (FDA) Reauthorization Act. The law directs the FDA to create a new class of OTC hearing aids for adults aged 18 and over with mild to moderate loss. Since the law’s passage, the FDA has been hard at work, meeting with affected parties to draft regulations. While the law allows the FDA three years to propose regulations—followed by six months for a public comment period—the agency may significantly accelerate that timetable. Given that the FDA has been examining pricing and access in the hearing aid industry for years, it could publish regulations for comment as quickly as the end of 2018.

Uncertainty surrounding the FDA’s timetable is only one factor complicating audiologists’ need to formulate a product and service strategy in response to the OTC Act. Just as challenging is that the industry lacks data on how consumer-patients will respond to the option of value-priced OTC hearing aids available from audiologists. Will these new devices expand the audiologist’s practice, bringing in new patient-consumers, some of whom purchase the value option, others who upgrade to traditional hearing aids? Or will OTC hearing aids cannibalize traditional hearing aids, leaving the audiologist struggling to serve patients profitably? Predicting answers to these questions is difficult, especially when the answers vary by local market.

In fact, each local market’s unique nature is another factor complicating the creation of an appropriate OTC strategy. In the audiologist’s geographic area, what is the average income level and socioeconomic status, average age, and general attitude towards health interventions? How much does price play a role in the decision to seek hearing assistance? How much stigma is attached to conventional hearing aids? For example, some of Florida’s wealthier counties, with their high socioeconomic status, preponderance of seniors, and established community of hearing aid wearers, will most likely continue to favor high-end hearing aids and audiologists who provide outstanding service and support.

Formulating a Product and Service Strategy to Respond to the OTC Hearing Aid Act

As a strategy and marketing consultant in hearing healthcare, I recommend to my clients to first articulate their goals and objectives. Stating the big picture up front helps keep the entire team focused once it dives into the thicket of implementation.

The strategic goal is to determine how the audiologist’s product line and services should change once OTC hearing aids become available.

The strategy’s objectives could read as follows:

Provide high quality hearing healthcare to patients

Offer care that results in a high level of patient satisfaction

Run a profitable practice

In other words, any changes in the practice’s offering should optimize these three objectives. Practices may wish to add additional objectives, based on conditions in their local market and the practice owners’ philosophy.

Note that the third objective above uses the P-word, “profitable,” even though profitability is a tricky matter when discussing the provision of health care. As a long-time hearing health advocate who has lived with hearing loss all of her life—I have a moderate-to-severe hearing loss—my first concern is to help more people who suffer from hearing loss to get treatment in the form of counseling and amplification.

However, I’m also a business person and a realist. Audiologists cannot strive for a high quality of care and high level of patient satisfaction while ignoring the profitability of their practices. All three objectives are important.

Strategic Options for Audiologists

With our strategic goal and objectives clarified, the next step is to list the options at their most basic. This approach is particularly useful when the environment is uncertain.

If we pare the strategic options down to their most fundamental, audiologists have two basic choices:

Specialty Product Portfolio. The audiologist focuses on consumer-patients who are not eligible for OTC hearing aids—those with severe hearing loss and under the age of 18—as well as consumer-patients who demand more service and functionality and have the ability to pay for it. The practice sells high-end hearing aids only, essentially continuing with business as usual.

Broad Product Portfolio. The audiologist remains committed to serving patients of all ages, with hearing loss varying from mild to severe. The practice offers a full range of products, from value-priced OTC hearing aids to higher-end hearing aids, recommending the best product based on patients’ needs.

In addition, audiologists who pursue a broad product portfolio may consider adding products such as hearing protection and expanding into related models of care, providing new services such as testing for fall risk, depression, and cognitive decline.

Audiologists who decide to stick with a more specialty product portfolio nonetheless need to put a plan in place to address the value segment of the market, referring those patients to another practice or even to an online store with a broad selection of quality products. Meeting the consumer-patient’s needs is paramount and will result in more business for the practice in the long run.

Where should audiologists play between these two basic options? My hypothesis: leaning more towards a broad product portfolio than a specialty one.

The best way for audiologists to determine how the introduction of OTC hearing aids will impact their individual practices is to run a market test. The appropriate strategy for each practice will depend on the practice’s market position—how it stacks up against other audiology practices in terms of pricing, location, and service in its market area and the needs of people with hearing loss in the market area.

The essence of the market test would be to introduce a value-priced hearing device into the practice’s product line and carefully track consumer-patients’ responses. Tracking outcomes of the test enables the practice to understand how its product mix changes and how its enhanced product line delivers on its objectives of quality of care, patient satisfaction, and clinic profitability.

The Rationale for Conducting a Market Test Now

Many audiologists currently are electing to wait to take action until the FDA releases its final regulations for OTC hearing aids and manufacturers introduce OTC-compliant hearing aids. In my experience in new market development, however, new markets often grow in spurts, with some changes occurring swiftly, debilitating players who are unprepared.

In the twelve months since the FDA announced that it would investigate creating a class of OTC hearing aids, the continental plates making up the hearing healthcare industry have experienced new pressures. The fiery industry debate and Congressional bipartisan support of the OTC Hearing Aid Act greatly increased press coverage of hearing healthcare, driving increased consumer awareness of the importance of treating hearing loss. Now that the Act has become law, large hearing aid companies are actively discussing possible alliances with smaller manufacturers of new hearing devices such as hearables. Meanwhile, nimble companies in related industries are ramping up to manufacture FDA-compliant OTC devices as soon as possible after regulations are released.

Audiologists need to anticipate how the market will change with OTC hearing aids, rather than wait to react to a potential earthquake of OTC products hitting the market. Introducing a new offering into the practice requires time, to select the appropriate product, train the practice team, modify systems, and update consumer-patient communications. I recommend that audiologists use this window of available time to better understand how OTC hearing aids will impact their addressable market by running a market test.
Of course, OTC hearing aids have not yet hit the market, complicating a market test. However, audiologists have at their disposal some useful proxies, in the form of value-priced hearing devices. Lower-cost, FDA-approved hearing aids, high-quality Personal Sound Amplification Devices (PSAPs), and customizable earbuds are all available right now to be used in a market test. (See the conclusion of this article for a profile of three such products.)

The Heart of the Market Test: Data

We are now ready to design the market test for the audiology practice. The test would be incomplete if it simply measured whether the number of hearing aids fitted increased once the practice expanded its product line with a value option. Instead, the test ideally would explain how the broader product line increased interest, trial, and purchase from the consumer-patient. Thus, the practice needs to capture data on each stage of the consumer-patient’s experience. Below are some examples of key areas that need to be tracked.

Converting prospects. Prospective patients may visit the practice website, receive a mailing or email campaign, or attend an informative seminar. Does the introduction of a value-priced hearing aid encourage more prospective consumer-patients into booking an appointment with the practice? This value product could be communicated subtly, by explaining in marketing copy that your product line includes a value-priced option, or more explicitly, by showing a product image with the corresponding price.

Performing assessments. How does the introduction of a value-priced hearing aid affect the consumer-patient’s willingness to undergo an assessment? Price-sensitive patients may be more amenable to an assessment if they believe that afterwards the audiologist has a device that meets their budgetary needs. Once again, the full range of the product line can be communicated in general terms to the patient—“we have a full range of products, including value-priced”—or more explicitly—“our hearing solutions packages range in price from $500 to several thousand dollars per device.”

Fitting devices. Finally, how does the introduction of a value device impact the number of hearing aids sold? Here the practice needs to track not only the number of devices sold by type after the assessment is performed, but also how the patient-consumer migrates to new devices over time. Does a broader product line encourage some patients to begin with a value model and later upgrade to a traditional hearing aid? Additionally, do a higher proportion of patients who initially refuse any amplification later return for a device when a value product is in the lineup?

Note that in the second area, Performing Assessments, that the assessment could be a simple pure tone hearing test or as comprehensive as a complete audiological evaluation. One example, beyond diagnostic hearing testing, is a comprehensive communications needs assessment that could be conducted by an audiologist prior to the recommendation of any amplification device. This type of assessment addresses the needs of the whole patient, connecting hearing to the patient’s broader health. The assessment entails not only performing a number of diagnostic tests, but also counseling the patient and family on the results. See Figure 1 for a summary of some of the key elements of this more patient-centered, holistic approach. A communications needs assessment, like the one outlined in Figure 1 below, provides a way for audiologists to differentiate themselves from online, drugstore, and other value channels offering OTC hearing aids.

Source: Kim Cavitt, Au.D., Audiology Resources, Inc.
In sum, during the test, the practice would gather data on the following variables:

Percent of prospects who make an appointment

Percent of appointments who purchase an assessment

Percent of consumer-patients assessed who needed a hearing device and purchased one within three months of the assessment, by product type

Percent of consumer-patients assessed who needed a hearing device and purchased one between four and nine months of the assessment, by product type

The test should also gather data on patient satisfaction by surveying members at all stages of the process.

The Overall Design of the Market Test

With these crucial data elements identified, we can now design the entire test from start to finish. What follows are the major steps involved in a market test:

Select product to be used for the test. Which value product will the practice add to its current product lineup? The selection depends upon the practice’s current base of consumer-patients and its positioning in its local market versus the competition.

Determine subset of patients for the test. Only a subset of patients will have the option of being fitted with a value device. The value device could be confined to one of the practice’s offices, or a single clinician in a one-office practice. Solo-practitioners may identify several days of the week when the market test is in effect.

Implement the test. Identify any changes in the practice processes required to add the value hearing device to the product line and train all staff. Update systems to collect the necessary data discussed in the previous section.

Analyze results. Compare the product mix in the base case and the test case. Analyze not only changes in revenue but also in costs, especially if the practice needed additional staffing to meet increased demand for the value hearing device. Be sure to evaluate over time whether consumer-patients fitted with a value device eventually upgrade to a traditional hearing aid with more functionality.

For audiologists, the most challenging area to forecast in response to the introduction of OTC hearing aids is how their product mix would change with the addition of one of these value-priced devices. A market test begins to provide clarity around this question. Once the practice can more accurately predict the number and types of hearing devices it would fit with an expanded product line, the corresponding costs are relatively easy to forecast.

More on Selecting Product for the Test

One of the crucial decisions in designing the market test is selecting the vendors that will supply the practice’s value hearing device. Below are three product vendors who represent different approaches for the value segment. Each of the three attended the Audacity 2017, the ADA’s annual convention. None of these products have the option for a custom fit or molds. See the accompanying tables for additional details on each vendor.

Bean. Perhaps best known to the audiology community for its hearing protection products, Etymotic Research, based in Elk Grove Village outside of Chicago, Illinois, manufactures the Bean Quiet Sound Amplifier. Introduced in 2015, this PSAP device retails for $399 a pair (with a premium for a T-coil) for patients with a mild hearing loss. The device amplifies high-frequencies, with a switch for two different levels of amplification. While the Bean doesn’t have the look of a hearing aid, Patricia A. Johnson, AuD, the Director of Audiology for the company, writes in an email, its “exceptional sound quality provides a positive listening experience, reinforcing the benefit that can be obtained with amplification.” She adds that “patients can return for hearing aids when they’re ready.” The product comes with seven different sized ear tips to enable the best fit.

IQ Buds. These intelligent wireless earbuds are from Nuheara, a startup based in Australia with offices in New York and San Francisco. The earbuds not only provide amplification, but also audio streaming and noise cancellation. Users may personalize the accompanying app, selecting from what the company calls on its website “5 different EQ curves,” better known to audiologists as presets for amplification. David Cannington, Cofounder of the company, writes in an email that “IQbuds™ represents a great opportunity for audiologists to tap a new fresh customer base and start them down the hearing health path,” including younger patients with mild hearing loss who find traditional hearing aids stigmatizing. Audiologists may retail the devices at $299 a pair. Nuheara offers audiologists a 40% wholesale price discount, with a minimum order quantity of 12, which also includes a branded retail display unit at no charge.

Plaid. Founded by an audiologist, Dan Schumaier, who has been practicing since 1972, Ear Technology Corporation of Johnson City, Tennessee, has designed the Plaid, a PSAP available only to audiologists. The device looks like a traditional hearing aid. “It’s my firm belief that most people want hearing instruments that are discrete. Also, when you occlude the ear, patients say, ‘I feel like I’m in a barrel’,” remarks Schumaier in front of his bustling booth at the AuDacity 2017. The company designed the product for patients who cannot afford a traditional hearing aid. With the wholesale price at $460 a pair (with volume discounts available), the audiologist may, for example, “sell a pair for $600 and make money,” Schumaier explains, avoiding the “disaster” of having to turn away a patient purely for reasons of price. “The front office can do the Plaids; they are very easy,” he adds.

Conclusion

Audiologists ignore the introduction of OTC hearing aids into the hearing healthcare marketplace at their peril, nor should they hazard a guess about how to respond to the new landscape. Instead, practice owners should run a market test to understand how the addition of a value-priced hearing device into their product lineup impacts key strategic objectives, including quality of care, patient satisfaction, and practice profitability. Such a market test creates a logical and steady foundation for audiologists planning to weather the seismic event of OTC hearing aids.

Bio:
Nancy M. Williams is President and Founder of Auditory Insight, a strategy and marketing consultancy for hearing healthcare. She leverages her expertise in new market development, patient engagement, and consumer insight, as well as her experiences as a hearing health advocate and person with hearing loss, to create a 360-degree perspective for companies solving hearing loss, including device manufacturers. payers, and private equity investors. Prior to founding Auditory Insight, she created and ran the patient engagement business for HPOne, working with Medicare Advantage payers to close care gaps and improve Star Ratings through patient outreach. A widely published writer and national speaker who has addressed thousands, she served on the Board of the Hearing Health Foundation for four years. She holds an MBA from Harvard Business School and a BA from Stanford University in Quantitative Economics, both with distinction.